Who'd ever have imagined? It's a contrarian market segmentation strategy for a home builder to put a big focus and lots of resources on the 55+ market right now, vs. the 30-something, entry-level, first-time buyer market.
However, as home builders here, there, and everywhere shift their chess pieces--land buys and operational capacity--into scrambling position to engage fully in the next wave of opportunities in housing's recovery, lower-priced house strategies, aiming to activate Millennial buyers, hog all the headlines these days. So much so that it might appear any other strategic direction is mistaken.
Typically--in housing cycles once known as normal--first-time buyers, made up mostly of young entry-level home buyers would account for almost 40% of all new home sales. So, it's a contrarian strategy--particularly for a home builder who serves first-time entry-level buyers, move-up and second-time-move up buyers, and 55+ age-targeted, and age-restricted buyers--to put an equal number of eggs in each of the three baskets of expected buyers.
Which is precisely what Taylor Morrison is doing.
Wall Street, in particular, is suddenly most keen on first-time, entry-level Millennial buyers. Emphasis on any other segment gets the third degree now, especially if that segment ties to higher home price ranges, where momentum has slowed (but growth continues at a lower rate of improvement than 24 months ago).
Taylor Morrison ceo Sheryl Palmer took this issue head-on--defending the company's a-third-a-third-and-a-third segmentation strategy--and especially the company's Esplanade 55+ community strategy in her latest 3rd quarter earnings call with Wall Street investment analysts Nov. 2.
Across the portfolio, we're projecting a five-year demand in the 20% to 29% range for millennials. For boomers, however, that five-year demand ranges from 30% to 46%. What's more, when we look at the detailed data by generation we find that 55% of our boomer buyers are purchasing homes more expensive than their previous home, and 35% of them are buying larger homes, with nearly 40% purchasing a home that is generally equal in size. This data coupled with the recently released statistic that nearly 25% of boomers have plans to move in the next five years indicates that this consumer segment will have a significant impact on our business in the coming years, and furthers our believe that we are well-positioned to meet the wants and needs of this diverse group.
Palmer got even more specific in answer to an analyst's question about the big win for builders who can "crack the code" and become truly attractive to Baby Boom buyers over the next five to eight year.
I think they're going to continue to be a significant part of the buying population when I look at the financial security of their balance sheet, and when I look at the impact they're going to have on our business. We've talked about over the last many quarters what a sophisticated buyer they are, and how they generally generate the highest margins across our portfolio because of the dollars they'll spend on lot premiums, on options, and really making sure they [get what they] want at this point in their life.
At BUILDER, we're big believers in this mindset, and have been honored to have Sheryl and her team--both corporate, the south Florida region, and the Orlando division--participate in a year-long "discovery" program called NEXTAdventure. The outcome, of course, is the NEXTAdventure Home, a 55+ new idea house, designed and engineered to meet the needs of people who, as Palmer says, "look at life differently, and who've accomplished different personal successes to the point they know what they want. They want to be able to fulfill the next part of the adventure. They know hat’s important in home and community."
NEXTadventure, in other words, has been part of Taylor Morrison's journey of learning how to make 55+ homes and communities meet its principle mission statement, "Inspired by you." We're grateful to Taylor Morrison, and the many design, engineering, manufacturing, and materials partners who've come together to make this journey an open process for the community.
Our unveiling, of course is the evening of Jan. 10, at Taylor Morrison's Esplanade at Highland Ranch, in Clermont, a few minutes from the Orlando Convention Center, and you're welcome to come see in person this remarkable testament to the NEXTadventure. Looking forward to seeing you there. We're all set to go Boom. Here's the info and registration link.
